Daily Outlook - Wall St. Extends Rally

By IBT Staff Reporter On 01/18/11 AT 9:17 PM

U.S. Dollar Trading (USD) the Dollar remained on the back foot as traders took on more risk after stock markets globally continued their march higher. The Bank of Canada held rates at 1.0% but was quite dovish in the accompanying statement and this caused the CAD to underperform the rest of the market. In US stocks, DJIA +50 points closing at 11837, S&P +1 points closing at 1295 and NASDAQ +10 points closing at 2765. Looking ahead, December Housing Starts are forecast at 0.55mln and December Building Permits are forecast at 0.555mn vs. 0.53mn previously.

The Euro (EUR) the market moved higher in Europe in response to very strong January German Zew Survey numbers at 15.4 vs. 4.3 previously. The market traded into the mid 1.3400 region before profit taking in the US session pushed the pair back under the figure. EUR/USD traded with a low of 1.3252 and a high of 1.3468 before closing at 1.3390. Looking ahead, November Current Account is forecast at -11.3bn vs. -9.8bn previously.

The Japanese Yen (JPY) was contained to Monday's range with the market moving on US Treasury Yield fluctuations predominately. Crosses are reflecting moves in their respective majors so are all moving higher tracking equity markets led by the EUR/JPY. Overall the USDJPY traded with a low of 82.31 and a high of 82.85 before closing the day around 82.60 inthe New York session.

The Sterling (GBP) broke above 1.6000 after very hot CPI numbers at 3.7% vs. 3.3% previously y/y. The BOE is an inflation targeting central bank with 3% the upper limit and this is leading to speculation the bank will be forced to raise rates to contain inflation if CPI remains high this year. Overall the GBP/USD traded with a low of 1.5893 and a high of 1.6062 before closing the day at 1.5980 in the New York session. Looking ahead, December Claimant Count is forecast at 1.5k vs. -1.2k previously.

The Australian Dollar (AUD) tested resistance at parity for most of the day after tracking higher in Asia on the back of strong risk appetite. AUD/JPY also moved higher but many crosses were under pressure as traders pared back expectations of RBA rate hikes in 2011 after the devastating QLD floods. Overall the AUD/USD traded with a low of 0.9895 and a high of 1.0008 before closing the US session at 0.9995.

Oil & Gold (XAU) grinded higher for most of the day reclaiming the $1370 level. Overall trading with a low of USD$1360 and high of USD $1377 before ending the New York session at USD$1373 an ounce. Oil was steady in relatively quiet trade. WTI Oil Closed +$0.15 at $91.25 a barrel.

TECHNICAL COMMENTARY

Currency

Sup 2

Sup 1

Spot

Res 1

Res 2

EUR/USD

1.3089

1.3245

1.3410

1.3457

1.3499

USD/JPY

81.61

81.89

82.50

83.15

84.11

GBP/USD

1.5719

1.5878

1.6005

1.6184

1.6299

AUD/USD

0.9804

0.9863

1.0005

1.0076

1.0173

XAU/USD

1348.00

1352

1373

1378

1396

OIL/USD

89.00

90.00

91.50

92.50

95.00

Euro - 1.3410

Initial support at 1.3245 (Jan 17 low) followed by 1.3089 (Jan 13 low). Initial resistance is now located at 1.3457 (Jan 14 high) followed by 1.3499 (Dec 14 high)

Yen - 82.50

Initial support is located at 81.89 (Jan 5 low) followed by 81.61 (Jan 4 low). Initial resistance is now at 83.15 (Jan 13 high) followed by 84.11 (Dec 20 high).

Pound - 1.6005

Initial support at 1.5878 (Jan 18 Low) followed by 1.5719 (Jan 13 low). Initial resistance is now at 1.6184 (Dec 12 high) followed by 1.6299 (Nov 4 High).

Australian Dollar - 1.0005

Initial support at 0.9863 (Jan 17 low) followed by the 0.9804 (Jan 12 low). Initial resistance is now at 1.0076 (Jan 5 high) followed by 1.0173 (Jan 4 high).

Gold - 1373

Initial support at 1352 (Jan 7 low) followed by 1348 (Nov 22 low). Initial resistance is now at 1378 (Jan 14 high) followed by 1396 (61.8% retrace of 1424.05-1352.70).

Oil - 91.50

Initial support at 90.00 (Intraday Support) followed by 89.00 (Intraday Support). Initial resistance is now at 92.50 (Intraday Resistance) followed by 95.00 (Intraday Resistance).